Fall Budget Forum:2016 Fiscal Results, 2017 Budget, Revenue, Performance Funding,

and Future Prospects

David L. Eisler, president

Sally DePew, director, budgetary planning & analysis

November 10, 2016

Outline for Today

• Federal and State economic trends, budget

• Ferris budget information– Look back at 2016 fiscal results; Impact of GASB 68– Information on 2017 budget

• Revenue

• Higher education formula funding

• Looking forward to 2018

Federal Budget

• No Federal Budget for 2017– Continuing Appropriations Resolution through December 9

• Includes funding for Zika virus and Louisiana flooding

• Election impact

• Continued support for Federal Pell Grants– FY 2017 funding of $29 Billion

– Maximum award $5,815 for 2017

• Perkins Loans eliminated after September 2017

• Unemployment 5.0 percent in September

Michigan Economy & Budget

• Michigan unemployment rate 4.6% in September

• State revenues slowly improving– September revenues below year ago, but ahead of May projection– General fund 4.2% growth estimate for FY17; 4.6% for FY18– School Aid Fund 2.8% growth in FY17; 2.9% in FY18

• FY 17 State budget of $54.9B (all sources)

• General Fund/General Purpose budget $10B (18.2% of total)

• Higher Education funding $1.58 billion– Federal $ 102 million 6%– School Aid Fund $ 237 million 15%– General Fund $1,244 million 79%

Michigan Budget PrioritiesOne-Year (2017) and Ten-Year (2007-2017) Change in

State Appropriations from State Resources

2.1% 1.4% 2.3% 3.2% 3.2%

3.0%

59.7%

2.5%11.0% 6.4%

6.6%

-7.9

%

Com

mun

ity

Col

lege

s

Cor

rect

ions

Tot

al

K-1

2

Hea

lth

and

Hum

an S

ervi

ces

Hig

her

Edu

cati

on

1-yr Change 10-yr Change

General Fund, $213, 71%

Designated Fund, $15, 5%

Auxiliary Fund, $40,

14%

Expendable Restricted Fund, $30,

10%

2015-2016 University Fiscal ResultsOperating Funds Revenues

$299 MillionAmounts in Millions

2015-2016 University Fiscal Results $215.5M General Fund Spending

Purpose of ExpenseAmounts in Millions

Compensation$148.4 69%

Operating Support$46.2 21%

Financial Aid$20.9 10%

2015-2016 University Fiscal ResultsGeneral Fund Expenditures

$215.5 MillionAmounts in Millions – State Reported HEIDI

Instruction and Academic Support

$123.0 57%

Student Services$16.58%

Plant$14.97%

Institutional Support $23.8 11%

Research/Public Service $0.5 0%

Transfers$16.37%

Financial Aid$20.9 10%

Michigan Public University Spending PatternsFiscal year 2015 Percent of General Fund Expenses by Function of Expense

45%

13%

6% 7%

11%

0%

7%10%

2%

37%

13%

5%

9% 9%6%

8%

12%

1%

Instruction AcademicSupport

Student Services Plant InstitutionalSupport

Research/PublicService

Transfers Financial Aid Auxiliary

FSU Average

Net Position

• Net Position – difference between assets and liabilities– Accumulated one-time balance June 30th

– Includes actual dollars and paper transactions

• Classifications– Capital Assets (net of debt) – infrastructure assets

– Restricted – by outside agencies or persons, i.e. Federal and State restricted scholarships and loans

– Unrestricted – without external restriction to use or purpose.

2015-2016 University Fiscal Results Net Assets / Net Position

$259.6 MillionAmounts in Millions

Invested in Capital Assets

$179.6

Restricted for Nonexpendable

Scholarships $24.8

Restricted for Expendable

Scholarships, Loans and Grants

$25.1

Unrestricted$30.2

GASB 68

• GASB (Governmental Accounting Standards Board) statement addressing reporting for pensions provided to state employees.

• Ferris, as a MPSERS university, must abide by this statement.

• Impact on financial statements– $65M of pension liability as of June 30, 2015– June 30, 2016 Increase to $91.9M liability

• Future statement will require reporting of health liabilities beginning June 2018

2015-2016 University Fiscal Results Unrestricted Net Assets

– Development (including Foundation)– Plant projects in progress– Maintenance reserve

• Held for University maintenance needs (all funds)• Ferris’ Facility Condition Index stands at 27.6% - new assessment

underway • Reserves are 4% of physical plant replacement value

– Auxiliary operations– Student loan funds– Fiscal year-end balances (encumbered and unencumbered)– Other unrestricted amounts (provision for self insurance, booked

unrealized gains, legal contingency, unallocated investment income waiting for distribution)

– Net pension liability – new for 2015; increased for 2016

2015-2016 University Fiscal ResultsUnrestricted Net Asset

ComparisonAmounts in Millions

$32.4

$13.8

$54.5

$9.6

$9.9

$1.7

$0.2

-$91.9

$28.3

$23.0

$37.4

$10.6

$11.8

$2.0

$0.2

-$65.2

Maintenance Reserve

Plant Projects in Planning

Development

All Other

Divisional Carryover/Encum.

Auxiliary Operations

Student Loan Funds

Net Pension Obligation

FY 2016 - $30.2M FY 2015 - $48.1M

2016-2017 General Fund Budget - $211.1MAmounts in Millions

State$53.225%

Tuition$154.873%

Other$3.1 2%

Revenue

Compensation (net of reduction), $147.7, 70%

Operating Support, $38.9,

18%

Student Aid, $24.5, 12%

Expense

2016-2017 General Fund Budget - $211.1MCompared to 2015-16

Amounts in Millions

$149

$42

$23

$148

$39

$25

Compensation Operating Support Student Aid

Expense

$51

$159

$3

$53

$155

$3

State Appropriation Tuition Other

Revenue

FY 16BudgetFY 17Budget

FY17 Compensation net of reductions

Academic Affairs $109.6

Administration and Finance $28.2

Executive $2.5

General Expenses$36.7

Governmental Relations General

Counsel $1.5

Kendall College of Art and Design

$19.3

Student Affairs $8.6

University Advancement and

Marketing $4.7

2016-2017 Budget - $211 MillionGeneral Fund Allocations

Amounts in Millions

$19.0 $18.1

$14.6 $14.8

$33.6 $32.9

FY 2016 FY 2017

Dining

Housing

Total

2016-17 BudgetHousing/Dining Budget Revenues

Compared to 2015-16 BudgetIn Millions

Housing$18.155%

Dining$14.845%

$32.9M Total

2016-17 Budget Housing/Dining Allocations

In Millions

Higher EducationFerris State

• Funding Formula Supports Ferris’ Mission

• Ferris received second-highest percentage increase in appropriations for FY 17 at 3.75%

• Ferris ‘17 General Fund budget is $211.1 million

– $53.2 (24.7%) base funding from state• Additional State MPSERS funding of $900k

– Tuition supports majority of General Fund

Higher EducationFerris State University Appropriation FY 11 to FY 17

(Amounts in Millions – Includes MPSERS Funding)

$48.6

$41.3$44.3

$46.1

$50.2 $51.3$53.2

FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

FSU Appropriation HistoryFinancial Statement Amounts – Base Appropriations plus MPSERS – In Millions

$56 $56

$50 $49 $49 $50

$44

$50

$54$50 $49 $49

$41$44 $46

$50 $51$53

FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 07Paid

FY 08 FY 08Paid

FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17

Michigan Public University General Fund Revenues

46.1% 45.4%

24.0% 21.5%

50.7% 47.0%73.6% 71.1%

FSU FY02 MPU FY02 FSU FY15 MPU FY15

State Appropriations Tuition and Fees Other

Higher EducationPerformance Fundingand Tuition Restraint

• Higher education budget included $47.9 million increase– $39.8 million – performance funding

– $ 5.5 million – grants and financial aid• $4.5 million of this is Tuition Incentive Program including cap on program

– $ 1.9 million – MSU (Ag Research, Extension, Vet Lab)

– $ .7 million - MPSERS

• Performance funding– Reinstatement of prior State reductions - proportional

– Critical Skills Undergraduate Degrees/Certificates

– Research and Development Expenditures

– Four measures scored against Carnegie Peers

• Six-Year Graduation Rate; Total Degree Completions; Institutional Support; Percent of Students Receiving a Pell Grant

• Requirement to not increase tuition more than 4.2%

Higher EducationFY 16 Performance and Other Funding Increases

FY 2016-17

Performance Measures

Proportional ReinstatementCritical Skills DegreesResearchCarnegie Metrics(FSU 9 of 107 points – 8.4%)Total (2.9% University increase)

FSU Increase over FY 16

Other State IncreasesGrants and Financial AidMPSERSMSU (Ag Exp./Ext/Vet Lab)

Total State Increase – 3.1%

Appropriated

$19,893,700$4,420,822$2,210,411

$13,262,467

$39,787,400

$5,486,000$730,000

$1,912,600

$47,916,000

FSU Amount

$680,972$356,276 $ 0$852,835

$1,890,100

FSU %/Total

3.4%8.1%

0%6.4%

4.75%

3.75%

Higher EducationPerformance Funding Increases

FY 13 to FY 17

State Performance

Funds

FSU Performance

FundsFSU % of

TotalFSU %

IncreaseHE %

Increase

FY 2012-13 $36,217,000 $2,926,400 8.1% 7.1% 3.0%

FY 2013-14 $21,869,000 $1,351,900 6.2% 3.1% 1.8%

FY 2014-15 $74,637,500 $3,450,500 4.6% 7.6% 5.9%

FY 2015-16 $20,099,400 $1,108,700 5.5% 2.3% 1.5%

FY 2016-17 $39,787,400 $1,890,100 4.8% 3.8% 2.9%

Performance Funding and Enrollment

• Four of the six performance funding metrics are tied to enrollment– Critical skills degrees awarded– Six-year graduation rate– Total degree completions– Percent of students receiving Pell

• Recruitment and retention of students will be a continuing priority for the University

Tuition Rate Increase History

2.4%

3.5%

1.9%

4.4%

6.4%

5.3%4.7% 5.1%

2.6% 2.2% 2.2% 2.40% 2.6%

FY 04-05 FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17

Resident Undergraduate Lower Division TuitionPercentage Increase

Michigan Public UniversitiesTotal Headcount – Enrollment Change

Fall 2011 – Fall 2015

-4.74%

-7.71%

1.06%2.69%

-22.08%

5.40%

2.96%

-11.72%

7.20%

-9.49%

2.19%3.94%

2.52%

-8.61%

-6.10%

-1.16%

CMU EMU FSU GVSU LSSU MSU MTU NMU OU SVSU UMAA UM-D UM-F WSU WMU Totals

Budget Balancing Approach

• September – Base budget reduced to match revenues, inputs match outputs– Divisions use one-time funds to soften impact during

2016-17

– Primary reductions are in positions through attrition

– No layoffs and no buyouts

• January – Revenue and base budget targets revised to reflect spring semester enrollment

Looking ForwardIssues to Watch

• Desire for greater legislative control• Performance funding formula stability

– Measures– Political pressures– Perceived inequity

• General Fund Support for Roads• Community College Baccalaureate• MPSERS• Strong pressure to restrain tuition• Competition in the School Aid Fund (HJR SS)• Federal support for Pell grants• Tuition Incentive Program – Funding and Limits• Capital Outlay

Questions, Comments, Discussion

Thank you……

Thank you for your continued efforts for our students

and to move Ferris State University forward

David L. Eisler